By Round Stage
It really depends on the category/business. But for most companies, month-over-month organic growth is a very useful metric. Depending on the base, 20–50% MoM growth can be good — retention, referral, and churn are all things we look at, too.
Rapid growth is the single biggest factor for attracting venture capital. So what exactly is rapid growth? It depends based on your investment stage, but there are a few important benchmarks: Pre-seed: Monthly growth of 15-20% or more Seed: Monthly growth of 15% or more Series A: Monthly growth of 12% or more Series B: Monthly growth of 10% or more Series C: Monthly growth of 5% or more
Most SaaS investors like to see LTV / CAC ratios in excess of 3-5x.
Killer metrics, repeatable growth and predictable sales model, used to be $80–$100k MRR/$1mm ARR, the bar is raising…
🔑 here is to aim for a 30% plus month over month growth rate
market-standard metrics like $100K MRR and double digit monthly growth as common targets.
Growth and solid G2M metrics are a bit of a proxy for gross MRR, but you have to have enough runtime with those numbers for investors to be comfortable they are real and will stick around. Two to three months of high growth might get the meeting, but everyone is going to want to see another chapter or two unless they fall in love with the business on the spot or have FOMO.
Founding teams with previous large exits under their belts can raise large amounts of money at very high valuations on the back of their track records and a Powerpoint presentation. For everybody else, you should have at least $100k (but ideally $150–250k) in MRR to raise a good Series A from good investors in 2016.
in the hardware space, a year ago, $1M in pre-sales on Kickstarter with a great product idea was sometimes enough to raise a Series A. Now, investors are demanding pre-sales in the millions with a product that's either functional or actually in production given the risk of bringing hardware to market.
a top-quartile enterprise-focused VC firm may have a $1 million ARR hurdle for a SaaS deal, or that a top-quartile consumer investor may have a $2 million run-rate revenue hurdle for an e-commerce company.
The very, very best SaaS companies go from $1m to $10m ARR in 5 quarters or less. If you can grow 10% MoM or faster at $1m ARR, you are doing a lot of things right. If you can grow in the teens MoM after $1m ARR, you are going to kill it.
The most successful founders I see wait to raise — they wait to demonstrate traction and hit proof-points that represent real step-change for their companies — and when they do, they ask for a lower range. It's much better to call and say, “So I was going after $6 to $8M, but it looks like we're going to be able to do $12M given the strong investor interest.”
Be clear on how you define “active.”
Note, if you have only few months of data, the conservative way to measure LTV is to look at historical value to date. Rather than predicting average life span and estimating how the retention curves might look, we prefer to measure 12 month and 24 month LTV.
investors typically expect the valuation to be ~3–4x of the new funds raised, that your round should be ~5x more than the previous one and that you need to get ~15 months runway from the new investment.
The average early stage equity round will dilute the existing shares in your company by approximately 20–25%; unless your company has extremely favourable momentum (stellar growth or usage metrics)
average time between funding rounds seems to be ~16 months
typical increase in round size vs the last round averages out across all funding rounds of each company at ~5x
For SaaS companies with ARR > 1M$. The 40% rule is that your growth rate + your profit should add up to 40%. So, if you are growing at 20%, you should be generating a profit of 20%. If you are growing at 40%, you should be generating a 0% profit. If you are growing at 50%, you can lose 10%. If you are doing better than the 40% rule, that’s awesome.
If you can grow from $1M to $3M in one year, then do another triple and then double for a few years, I'd say that's still very impressive growth which should allow you to raise money at good terms.
15-20% MRR growth number is a reasonably good target for post-Seed/pre-Series A SaaS startups to aim for.
A quick ratio of 1.5 was about average for a consumer business. For recurring revenue however, this is not so good. For enterprise SaaS companies, we prefer to invest in companies with a quick ratio greater than 4. If you have a quick ratio of <2 then your churn is probably too high and you have something to fix.
If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business. At 2% monthly churn, you are losing about 22% of your revenue every year.
The best SaaS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8.
Many of the best SaaS businesses are able to recover their CAC in 5-7 months.
create (acquistion) channels that pay back within 6-12 months
All revenue is not created equal. The quality of the revenue matters just as much as the quantity and growth rate. The companies in our dataset that were valued most favorably at IPO have predictable revenue streams, high-gross margins and low customer churn. These companies generally avoid services and other one-time revenue.
Stay above 20 percent growth (per year). Companies are only able to go public if they are growing quickly.
Ecommerce: $1 million monthly recurring revenue (MRR) is the key metric here. Consumer Apps: 50K daily active users & 25% month-over-month (MoM) user growth SaaS: $50-150K MRR & > 100% YoY growth on MRR or annual run rate (ARR) basis Marketplace: $500K-$1 million in monthly gross market volume (GMV) & 20-30% MoM growth in GMV & Liquidity: > 10% demand/supply ratio & Transaction velocity: the time it takes to have a transaction clear should be decreasing.
A good growth rate during YC is 5-7% a week. If you can hit 10% a week you're doing exceptionally well. If you can only manage 1%, it's a sign you haven't yet figured out what you're doing.
Rough estimates of CAC depending on your sales model: Freemium: 0 - 10$ No touch self service: 50 - 200$ Light touch Inside Sales: 1000 - 2000$ Hight touch inside Sales: 3000 - 8000$ Field Sales: 25000 - 75000$ Fields Sales with Sales Engineer: 75000 - 200000$
We have funded SaaS companies that are pre-revenue all the way up to an MRR of $100k.
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